Sunday, April 24, 2011

The tax debate has never been about the evidence

Matt Yglesias sees the American right retreating from intellectual/empirical attacks on progressive taxation, and falling back on moral attacks:

You can tell something’s happening in the economic policy debate when you start reading more things like AEI’s Arthur Brooks explaining that it would simply be unfair to raise taxes on the rich. Harvard economics professor and former Council of Economics Advisor chairman Greg Mankiw has said the same thing...[W]e used to have a debate in which the left said redistributive taxation might be a good idea and then the right replied that it might sound good, but actually the consequences would be bad. Lower taxes on the rich would lead to more growth and faster increase in incomes.

Now that idea seems to be so unsupportable that the talking point is switched. It’s not that higher taxes on our Galtian Overlords would backfire and make us worse off. It’s just that it would be immoral of us to ask them to pay more taxes[.]

[M]y take is that what we’re looking at is the closing of the conservative intellectual universe, the creation of an echo chamber in which rightists talk only to each other, and in which even the pretense of caring about ordinary people is disappearing. I mean, we’ve been living for some time in an environment in which...Chicago professors making several hundred thousand a year whine that they can’t afford any more taxes, and are surprised when that rubs some people the wrong way. Why wouldn’t such people find it completely natural to think that the hurt feelings of the rich are the main consideration in economic policy?

While I think neither Yglesias nor Krugman is incorrect, I do think there are a couple of important factors that they don't mention in their posts.

The first of these is a selection effect. Specifically, after decades of conservative economic policies, the only people left arguing for even more conservative policies tend to be either blinkered ideologues or vested interests. Back in the 70's taxes on the rich were high, but now they're quite low. There's no room to cut them any more without forcing the American government into default (and, in fact, the Bush tax cuts will probably do this if not repealed). Any economic benefit that we might ever have gleaned from trickle-down economics had to have been tapped out way back in the 80s.

So who is still arguing that taxes on the rich are oppressively high? Well, rich people who don't mind if the country is forced into default, for one. And also people who, because of their personal morals, just really, really, really don't like progressive taxation. The winnowing of the conservative raison d'etre is going to produce the kind of "echo chamber" that Krugman sees, as well as the increasing moralization cited by Yglesias. Conservatives won the policy debate, back when Matt Yglesias and I were in diapers. What we call the "conservative intellectual movement" in 2011 is a handful of corrupt, silly, or monomaniacal people trying (somewhat lamely) to replicate the victory their forebears won in the 80s.

But actually, I think there is something even bigger that Yglesias and Krugman don't mention. Specifically, the debate about taxation may have been an intellectual one at the elite level, but on the level that really matters - mass opinion - it has always been about morals and emotions, and never about elasticities or deadweight losses. The idea that progressive taxation "punishes success" is something my dad was hearing back in the early 80s; my history teacher gave me that line back in '97, and I suspect it was a common refrain a century earlier than that. The "fairness" argument is not new. And on an even broader level, it was stereotypes of "welfare queens" and lazy minorities that turned working-class whites against social insurance (and against government programs in general) in the Reagan years.

It was these emotional and tribal appeals that shifted much of America to the Republican camp. The average working- or middle-class Republican voter doesn't have a clue who Greg Mankiw is, what determines economic growth rates, or how trickle-down economic policies are supposed to work. But, in whole or in part, he has bought into a narrative that tells him that he does a hard, honest day's work, and that taxes and government spending are nothing more than a way of punishing him for that hard day's work (and, probably, rewarding some black or Hispanic person for a life of indolence).

That is why we are still having a debate over progressive taxation at all. The rump movement that is still trying to make an intellectual case for tax cuts at the elite level maintains their outsized clout and elevated profile only because of the success of the populist narrative that keeps the Red States red. Until we change that populist narrative, we can smack down Arthur Brooks and laugh at Greg Mankiw all we like, but we're not going to save our nation-state from fiscal ruin. I'm sorry if that sounds overly pessimistic.

6 comments:

Mass opinion is, as you say, composed of emotion and attitude. Most people, living their lives as best they can, do not have the individual capacity or interest to develop sophisticated political opinions. A great many, predictably, will adopt authoritarian political attitudes. That's a fact of social psychology, though, not a policy program. They take their cues from specialists, members of the elite, who do spend all their time on politics, as advocates or observers.

Mass opinion is the opinion of followers, not leaders, and liberals abandoned the kind mass-membership organization and community organizing, the appeals to political solidarity, which unites the interests of the mass of people to some elite faction, able fight the good fight.

The politics of de-regulation began in the Carter Administration, and it was possible because, on economic issues, liberals were becoming neo-liberals. So, the savings and loans were destroyed. The trade unions were destroyed. The mass-media consolidated into corporate propaganda machine.

Movement conservatism, an elite activity, succeeded in their economic program, beyond, I'm sure, their wildest dreams in the 1970s, because they were unopposed.

Conservative economics is still largely unopposed, in academia and in the popular discourse of the political Media. The pendulum should have swung back at some point, but instead the clock stopped.

"Until we change that populist narrative...we're not going to save our nation-state from fiscal ruin."

I would say just the opposite. Assuming that the economy gets into a sufficiently strong recovery (failing which, this whole argument is academic), the way to save our nation-state from fiscal ruin is for the parties to disagree strenuously on the question of progressive taxation and to be so pigheaded about it that they refuse to compromise on any extension of the Bush tax cuts. In case you hadn't noticed, Obama's position (although he would never phrase it this way) is that the bulk of the Bush tax cuts should be made permanent. The Republicans are doing the country a favor by insisting on keeping marginal tax rates low on the rich, because this gives Obama an excuse to do the right thing (assuming it will be the right thing two years from now) and let the tax cuts expire instead of sticking to his fiscally disastrous campaign promise.

The fact is, substantively, in terms of the policies actually under consideration (at least with respect to the income tax), progressivity is a relatively minor issue. The big issue is how high income taxes will be overall, and from the point of view of fiscal conservatism, Obama is on the wrong side of that issue (as are most people on both sides of the aisle in Congress, and, I'm guessing, the majority of the American people at election time).

As a practical matter, I applaud you all on both sides for spending a lot of time debating progressivity, not because it's an important issue but because it's not. It's a necessary smoke screen to save the American people from their own foolishness, so by all means, let's blow as much smoke as possible!

There's a very old saying amongst accomplished African-Americans (I have a technical PhD, but no job) that we have to be at least twice as good to get at least half the credit.

I would refer you to Tim Wise, who lectures about "white privilege."

People like myself literally need protection from white bigots in positions of relative power. The role of government is not an abstract for us, ineffective as it actually is in practice.

God bless Barack Obama, but the truth is that his maternal family was white, and provided him a circle of support and protection that many like myself have never had. His election has caused a backlash against people like myself.

The era of Reconstruction is repeating itself. We are most certainly not in a post-racial era in this country. Far from it.

Here an important point is that the vast majority of the general public wants higher taxes on incomes over $250,000. Even back when the debate was between taxes on the rich and deficits (about which no one really cares) there was a good 60% majority. Now it is 70%.

There is also overwhelming public support for some social insurance such as Social security OASDI (the d is disability) Medicare and Medicaid.

The shocking thing is that a substantial majority have responded that the rich pay less than their fair share of taxes in polls dating back to the 80s. A solid majority said that in 2000 just before the Bush tax cuts.

The political power of the supporters of low taxes on the rich isn't based on public opinion. It hasn't been for at least two decades.

I usually provide links for these claims. The long series of polls is due to Gallup. You can find it at pollingreport.com under some heading like taxes (go to the third page of polls).

Somehow the Republicans win elections even though they are the party absolutely dedicated to low taxes on the rich and most US adults want higher taxes on the rich. They convince voters that the real issue is say gay marriage (2004) or how Bush spoke through a bullhorn at ground zero (2002).